Emerging market import demand lifts world trade

Strong demand for imports from developing nations is driving a recovery in world trade this year, with European Union countries likely to be the main beneficiaries, S&P Global Ratings said in a report.

While trade growth has languished in recent years, the report found global imports had risen by 4.1 per cent year-on-year in the first two months of 2017 – growing at a much faster clip than 1.3 per cent in 2016 and above the average annual growth rate of 2 per cent between 2012 and 2016.

“World trade growth is gaining momentum after a prolonged period of weakness,” said S&P economist Tatiana Lysenko in the report, which is based on data from the Netherlands’ Bureau for Economic Policy Analysis, CPB.

“This pickup in global trade is benefiting the economies of the EU, the world’s largest exporter of manufactured goods and services,” Lysenko wrote, noting German exports had rebounded 5.5 per cent year-on-year in the first quarter while Spain had posted a 13 per cent gain in January-February.

Volumes of imported goods into emerging economies surged by nearly 10 per cent at the start of the year after virtually stagnating in 2016, S&P said.

This stood in sharp contrast to developed economies, where import growth slowed to 0.4 per cent in the same period after expanding 1.9 per cent in 2016, with the exception of the US, where import demand picked up at the start of the year.

Two major factors contributed to the recent surge in imports in emerging economies, Lysenko said. First, the recovery in commodity prices has helped Russia and Brazil to emerge from economic recession. China’s economy too has not slowed sharply as some had feared. The second key factor is the recent appreciation of many emerging market currencies, S&P said.